Luxury cars in China can cost quadruple what they do in the U.S. That is where barely-legal business of car exporting comes in.
China is in the midst of an unprecedented period of growth and wealth. Its burgeoning economy has created high demand for all kinds of luxury goods, but none with the demand of high end cars. But luxury cars in China can cost quadruple what they do in the U.S. That is where barely-legal business of car exporting comes in.
The Daily Beast has an excellent investigative piece, chronicling how brokers move luxury cars that intended for an American buyer to China, and making bank in the process. It teeters on the edge of legality.
Automakers heavily frown on the practice of selling a car from one market to another. But for some brokers, the huge price difference is too good to pass up. According to the report, a broker will post a Craigslist ad, looking for someone to buy a car stateside. Cash is plunked down for the car, it is shipped to China, and a great profit is reaped, but at what cost? Some automakers went so far as to ask federal regulators to investigate, and prosecute, those who were taking part in this practice. Car makers are pressuring their dealers to sniff out offenders, and brands like Jaguar Land Rover are even threatening to take more aggressive action.
According to the report, if a U.S.-spec Range Rover or F-Type is found in China, JLR might take action against the dealer that originally ordered that car in the ‘States. Such penalties from the automaker could include fines, sending less popular vehicles to the dealer, or even the potential of ending their relationship with that dealer. This pressure from dealers to play cop puts the franchises in a very delicate position. California has something called the Unruh Act, any potential customer is entitled to “full and equal accommodations, advantages, facilities, privileges, or services in all business establishments.” A dealer can’t outright ask someone if they are up to shady practices, and dealers try to look up customers via their social media accounts to determine their credibility.
In the end, some automakers accept some small percentage of their cars will end up in other markets, and dealers just have to work to not cross that threshold (for Jaguar Land Rover dealers its three precent). For the brokers who employ random Craigslist buyers to facilitate their exports, the profits reaped from this fraudulent practice will continue to be lucrative as long as luxury cars command such high prices in China.